Was it an unhappy customer? An underperforming employee? A disgruntled competitor?
Prudential Locations LLC really, really wanted to know who filed two complaints years ago alleging that the local real estate brokerage firm violated a federal kickback law.
The allegations were disposed of long ago, with Prudential settling one case and the federal government dropping the other. But the company continued a quest to identify its accuser or accusers.
Whoever it was, their identity will be kept private by the government after a ruling from a federal appeals court Wednesday.
In a 2-1 decision, the 9th Circuit Court of Appeals ruled that the federal Department of Housing and Urban Development was justified to keep confidential the identity of the authors of complaints in 2003 and 2008 alleging that Prudential broke the law.
HUD investigated both complaints, and ruled that Prudential violated the law in the first case but not in the second.
The first complaint stemmed from someone who read an item in a 2003 Honolulu Star-Bulletin column, saying a Prudential agent had won a new Mercedes-Benz at a "Wells Fargo Friends" party. The complaint alleged that Prudential held the party for real estate agents who had referred at least $1 million of business in 2002 to Wells Fargo Home Mortgage LLC, a Prudential affiliate.
Use of the Mercedes for three years along with trips to Thailand and Las Vegas were among six prizes awarded at the party, promoted as an inaugural annual event.
HUD pursued the case, saying the prizes violated a federal law prohibiting anyone from giving something of value to real estate agents for referring real estate settlement services.
Prudential argued that the prizes didn’t constitute kickbacks because brokers didn’t know in advance that they would be eligible for such awards when they did business with Wells Fargo. The company did not repeat the party and paid $48,000 to settle the matter in 2005, saying it did so to avoid a costly and time-consuming legal battle.
The 2008 complaint alleged that Prudential was charging extra transaction coordination fees if brokers didn’t use affiliated mortgage and title companies. HUD started an investigation but canceled it in early 2009 after concluding the complaint was unsubstantiated.
While HUD was looking into the second complaint, Prudential sought to compel the agency to disclose who lodged the allegation and the one made in 2003.
The brokerage firm initially filed a request with HUD under the Freedom of Information Act. After HUD refused, Prudential filed a lawsuit in 2009 in U.S. District Court to get the information.
Prudential lost the suit, but appealed the decision to the 9th Circuit, which heard arguments on the case in 2011 in Hawaii and last year in California.
Jason Kim, a San Francisco attorney representing Prudential, argued in the appeal last year that a public interest exists for knowing who makes complaints to shed light on how investigations are initiated and whether government resources are being misapplied in cases where complaints are not from consumers.
U.S. Department of Justice attorney Steve Frank argued that whoever complained to HUD has a right to privacy, while their connection to the issue — as a rival business owner or Prudential employee or a consumer — has no bearing on whether HUD investigates.
"It doesn’t matter who these people are and how they are situated," Frank told the court. "The name of the person who made the complaint is totally irrelevant to whether or not HUD conducts an investigation."
Judge William Fletcher commented on whether the complainants had a reason to fear adverse action from Prudential given the vigor with which the company pursued its identity quest.
The court’s written order noted that the District Court said in its opinion that Prudential mentioned the possibility of a civil lawsuit against whoever filed what it considered "sham" complaints.
Kim told the judges that the likelihood of retaliation was purely hypothetical and conjectural.
Paul Alston, a Honolulu attorney who also represented Prudential, said the company pursued the case on the principle that people who make false and fraudulent accusations should not be able to hide behind privacy rights. "It doesn’t seem like good policy," he said.
Fletcher voted in favor of HUD’s position with Judge Wallace Tashima. Judge Marsha Berzon dissented, and said HUD needed to show more justification for protecting personal privacy.
Alston said the U.S. Supreme Court isn’t likely to take up the issue on appeal, so the case is done.
